The impact of aging and technological relatedness on agglomeration externalities

Abstract

We study localization, urbanization and Jacobs’ externality effects on plant survival in Sweden (1970–2004). We focus on two questions: (i) do agglomeration externalities change with the age of plants? and (ii) what is the role of technological relatedness among local industries? We find that agglomeration externalities affect survival chances of plants. This effect, however, differs between corporate and non-affiliated plants. Furthermore, we find that Jacobs’ externalities benefit only young plants, whereas urbanization externalities harm plants at all ages. Localization externalities are insignificant, while the local presence of technologically related industries substantially increases survival rates of plants.